Sunday, September 6, 2009

The planet-saver that's still just a pipe dream

Carbon capture and storage is expensive, risky and may not work, writes Paddy Manning.

THERE may be a few forced smiles when Martin Ferguson dishes out $2.4 billion in funding for a handful of "flagship" carbon capture and storage projects (CCS), intended to clean up carbon dioxide emissions from coal-fired power stations.

As the Energy and Resources Minister knows, these CCS projects have taken one helluva time to get up and running - and it will be a long while yet before they make any significant contribution to Australia's CO2 emission reductions.

For at least a decade, the coal industry has promoted a range of clean coal technologies, including CCS, as an alternative to renewable energy. But as necessary emission reduction trajectories get deeper and steeper, the industry has been tardy - stubborn, even - about paying for it.

Instead the public will foot most of the bill for CCS, and will wear the liability if it goes wrong.

CCS projects have a conspicuous history of failure - here and overseas. Put simply, nobody has yet integrated power generation with carbon capture and storage at scale to create clean electricity, anywhere in the world.

And many experts, including from within the energy industry, believe CCS will remain prohibitively expensive and risky compared with known baseload power sources such as nuclear, or renewable sources such as geothermal or concentrating solar thermal which do not leave vast underground stores of carbon dioxide for future generations to worry about.

In April the CSIRO's energy chief, David Brockway, told a federal parliamentary inquiry on climate change that while he did not have a crystal ball, over the next 15 years wholesale electricity costs would roughly triple from the present $40/MWh, as CCS is incorporated into coal-fired power generation. That would bring it, he said, roughly into line with solar thermal - about $160-$200/MWh but falling fast - and wind energy, likely to remain stable at $100-$110/Mwh (other estimates are lower) because it is a mature technology.

It's not a reasonable comparison, though, because solar thermal and wind power actually exist. Iain MacGill, the joint director of the Centre for Energy and Environmental Markets at the University of NSW, says "all prices for CCS are projections right now, because they haven't actually done it yet. Until they can make CCS work, they're on a different planet."

The executive director of the Australia Institute, Richard Denniss, says he would love to see CCS work. But if it doesn't, he asks, "what's plan B?"

Federal and state governments are keen to support the coal industry, which provides cheap power, claims to employ 30,000 Australians directly and was our biggest export earner in 2008-09, with about $50 billion in combined overseas sales of metallurgical and thermal coal.

Especially vulnerable are the coal-reliant communities of the Hunter Valley and Victoria's Latrobe Valley. In both regions, local councils, environment groups and sections of the union movement are working to develop ''just transition'' plans to create green collar jobs - and avoid job losses - as part of an orderly switch to gas-fired or renewable power.

Not even the Greens are proposing, in Kevin Rudd's parlance, to "shut down the coal industry by Thursday" and abandon these communities.

The Institute for Sustainable Futures estimated annual national financial assistance for coal was more than $1.2 billion in 2005-06, in terms of direct subsidies, cheap fuel and accelerated depreciation. The industry pays cheap royalties to the states under a regime which is the envy of the gas lobby.

There is also infrastructure funding designed to ease years of capacity constraints - for example, last year's $1 billion-plus in federal rail funding to help double export capacity from the Hunter Valley coal chain by 2014, and the NSW budget's $205 million to expand Eraring power station on the Central Coast.

The Federal Government is proposing to issue $3.9 billion worth of free permits to coal-fired power generators under its carbon pollution reduction scheme, and is being urged to compensate power station owners for the anticipated loss in the value of their assets if or when such a scheme is introduced.

On top of that, in May the Federal Government announced $2.8 billion would be set aside to fund clean coal initiatives, including $2.4 billion to fund between two and four ''flagship'' coal- or gas-fired power stations with CCS over the next nine years.

The CCS flagships funding was part of a broader clean energy initiative, including $1.5 billion to part-fund a number of flagship solar power stations under a separate process, and a $500 million fund to support emerging renewable technologies such as wave and geothermal.

Australia, as the world's biggest coal exporter, wants to lead on clean coal with its Global CCS Institute, which won plaudits from the US President, Barack Obama, earlier this year.

The International Energy Association predicts CCS could deliver almost 20 per cent of emissions reductions needed to cut annual emissions in half by 2050, globally, but last year said "current spending and activity levels are nowhere near enough to achieve these deployment goals".

Under modelling linked to the proposed carbon pollution reduction scheme, and depending which emissions reduction trajectory is chosen, Australia will broadly get a third of its reduction in emissions from energy efficiency, a third from introduction of renewables spurred by the recently-legislated ''20 per cent by 2020'' target, and a third from CCS.

The modelling, by the energy consultants McLennan Magasanik Associates, predicts CCS will become commercially viable in about 2030. Walter Gerardi, its director, says: "I think the reason why CCS might have some legs here is we have a very low coal price compared with other countries, and very good potential storage opportunities. So the cost of CCS could be lower here than in other countries.''

That would mean storing about 1.6 to 1.7 billion tonnes of CO2 from the electricity generation sector by 2050. Is that realistic? The biggest existing carbon sequestration project in the world, Norway's Sleipner Field, has taken about 1 million tonnes a year since 1996.

The $50 billion Chevron-operated Gorgon LNG processing facility at Barrow Island, off WA's Pilbara coast, will pass Sleipner to become the world's biggest carbon sequestration project, with about 3 million tonnes a year of CO2 to be injected underground there.

But the Gorgon CCS project will not reduce emissions in Australia, although the export of LNG could be expected to reduce emissions overseas as it replaces the burning of dirtier fuels such as coal.

The biggest existing carbon storage facility in Australia is at Victoria's Otway Basin, where more than 50,000 tonnes and rising are stored, so far safely. But it's tiny. The depleted oil and gas fields of the Gippsland Basin, off Victoria's east coast, are believed to have the capacity to store all of Australia's CO2 emissions - but the cost of CCS is typically considered prohibitive if the distance to injection of captured CO2 exceeds a hundred kilometres.

Most pilot projects capture less than 10,000 tonnes of CO2 a year. The biggest CCS facility attached to an existing coal-fired station, a $10 million demonstration plant at Victoria's Hazelwood in the Latrobe Valley, captures just 25 tonnes of CO2 a day - 0.05 per cent of its total emissions - at a reported cost of at least $1100 per tonne captured. That does not include storage.

At Lake Munmorah, in the Hunter Valley, a $5 million pilot facility can capture 3000 tonnes of CO2 a year. As one Delta Electricity executive quipped the day I visited: "We're not going to save the planet with this one.''

The next step there is a larger-scale $150 million plant, capturing up to 100,000 tonnes a year of CO2. That would equate to a cost of $130 per tonne of CO2 captured, says the NSW Greens' energy spokesman, John Kaye - or between $119-$124/MWh before they work out where to put the CO2 or how to get it there.

But it's not as though the coal industry has suddenly seen a need to get cracking. The Australian Coal Association has been weighing the merits of CCS since the 1980s.

A November 1989 position paper on the greenhouse effect noted CO2 removal and storage was "not regarded as a feasible option for fossil fuel power stations''. "Technologically, the processes have been shown to be feasible; however, they would add substantially to plant, capital and operating costs, would consume a considerable portion of the plant's output and would increase fuel usage. Also, there are uncertainties about the practicability of [storing] collected CO2."

Ian Dunlop, a retired Shell executive who was the chairman of the Australian Coal Association in the late 1980s and headed the Howard government's Emissions Trading Taskforce in 1998, says the coal industry was aware there was a serious prospect that more research would need to be done on CCS - in fact, that it had some disadvantages. "Now, we're hanging our futures on it."

Other supporters of CCS have lambasted the coal industry's failure to back the technology. Last year the Government's climate change adviser, Professor Ross Garnaut, criticised investment by the industry group Coal21 as inadequate and said industry should be spending more like $250 million a year.

In 2007 the Construction, Forestry, Mining and Energy Union's Tony Maher, now national president, told a meeting of Newcastle Council that - unlike renewables, where there was a clear need for government funding for pilot projects - the coal mining industry was ''a very wealthy global private sector industry and it does not need one dollar of public support''. He said scepticism about CCS would ''only be overcome once it's developed … but there's no reason to oppose the use of the private sector's money to deploy those technologies. If it doesn't work, you've only wasted Rio Tinto and BHP's money, and I don't see that there's any need to cry about that."

Nowadays he supports public funding for CCS and welcomed the Federal Government's flagships announcement.

In July WWF, the one conservation group consistently promoting CCS, ran out of patience.

Its chief executive, Greg Bourne, a member of the key government and industry advisory bodies pushing for investment in CCS, noted the Government's almost $3 billion in finance for CCS shamed the meagre $1 billion commitment from the Coal21 fund in the wake of a tripling in coal prices.

"Should the public be prepared to spend $3 for every one dollar spent by big polluters?" he asked. "If these highly profitable organisations were serious about securing their future and reducing their emissions, they would be ploughing money into deploying CCS. What we're seeing instead is the Australian taxpayer doing all the heavy lifting, without any of the financial benefit.''